Korea Won Rises to One-Month High on Current Account; Bonds Gain

The won rose to a one-month high on speculation South Korea will attract more fund inflows as its current-account surplus widens. Government bonds rose.

The currency advanced for a fourth day as the Bank of Korea said in a statement today that the excess in the broadest measure of trade increased to $4.98 billion in March from a revised $2.71 billion in February. The won also climbed as the dollar weakened against most of its major peers, including the yen, after data on April 26 showed first-quarter gross domestic product in the U.S. increased at a 2.5 percent annualized rate, less than economists had forecast.

“A bigger current-account surplus signals there will be more dollar inflows into the nation,” said Hong Seok Chan, analyst at Daishin Economic Research Institute in Seoul. “Globally, the dollar weakened after the U.S. GDP numbers, prompting the yen to gain and the won to follow suit. Still, concerns that authorities may try to stem the won’s gain and possible North Korea threats may limit further rise.”

The won gained 0.4 percent to 1,107.30 per dollar in Seoul, according to data compiled by Bloomberg. It earlier touched 1,106.65, highest since March 27. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose six basis points, or 0.06 percentage point, to 7.32 percent.

South Korea’s April exports of automobile and other products may rise 1 percent to 2 percent from a year earlier as exporters’ competitiveness is undermined by a weak Japanese currency, the finance ministry said in a statement yesterday. The government estimates that a 10 percent gain in the won versus the yen will result in South Korea’s exports dropping 1.9 percent from a year earlier in the following quarter.

Yen Weakness

The won has climbed 8.3 percent against the yen this year and weakened 3.9 percent versus the dollar, data compiled by Bloomberg show. The yen has declined more than 11 percent against the greenback in the same period.

North Korea is still in the process of preparing Musudan missile launch, Yonhap News reported, citing presidential office spokesman Yoon Chang Jung, who was commenting on media reports the North stopped missile launch preparation. The Korean peninsula has been on edge since February, when Kim Jong Un’s regime detonated an atomic bomb in defiance of United Nations sanctions and then threatened preemptive nuclear strikes against its enemies.

The yield on the 2.75 percent government bonds due March 2018 fell one basis point to 2.57 percent, according to prices from Korea Exchange Inc.

To contact the reporter on this story: Seyoon Kim in Seoul at skim7@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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